Johannesburg, 09 April 2014: Global Credit Rating Co. (Pty) Ltd (‘GCR’) has accorded an indicative, public long term ‘A-(ZA)’ rating and ‘Stable’ Outlook to the following senior notes to be issued by Curro Holdings Limited (the ‘Issuer’) on 10 April 2014 (the ‘Transaction’):
– ZAR 125m, Senior Secured Floating Rate Notes, expected maturity 10 April 2019, stock code COH002 (the ‘New Notes’).
Concurrently, GCR has affirmed the final, public long term ‘A-(ZA)’ rating and ‘Stable’ Outlook accorded to the Issuer’s senior secured notes issued on 02 December 2013:
– ZAR 150m, Senior Secured Floating Rate Notes, maturing 26 November 2018, stock code COH001 (the ‘Existing Notes’).
The aggregate R275m in New Notes and Existing Notes will be secured by a portfolio of Curro Holdings Limited (‘the Issuer’s) Schools (the underlying collateral). The Transaction entails the public listing of the senior secured notes on the Interest Rate Market of the Johannesburg Stock Exchange and forms part of the Issuer’s R2bn Domestic Medium Term Note Programme. The Transaction sponsor is PSG Capital Proprietary Limited (‘PSG Capital’).
The Transaction was analysed by estimating the recovery prospects arising from enforcement by Curro Security SPV (Pty) Ltd (RF) (the ‘Security SPV’) of the underlying collateral that serves as security for the benefit of the Senior Secured Noteholders. The ratings of the New Notes and Existing Notes were derived by applying a notching approach, given the recovery prospects, starting from the long term corporate credit rating of the Issuer. Based on fundamentals and prospects of the Issuer, GCR has accorded a ‘BBB-(ZA)’ long term national scale corporate credit rating with a ‘Stable’ outlook to the Issuer. A rating uplift of 3 national scale notches was deemed appropriate in this particular transaction, given the “Excellent Recovery Prospects” equating to a ‘A-(ZA)’ rating on the Transaction.
The indicative, public ratings accorded to the New Notes and the final, public ratings accorded to the Existing Notes relate to ultimate payment of interest and principal (as opposed to timely, akin to a loss severity rating therefore). The ratings exclude an assessment of the ability of the Issuer to pay any (early repayment) penalties. If the ratings accorded to the Issuer change, the rating of the New Notes and Existing Notes may also change, but potentially not in the same scale. The indicative, public ratings will be finalised upon receipt of satisfactory final executed signed transaction documentation. For more information on the Transaction, please read GCR’s Pre-funding Report on this Transaction to be published on 09 April 2014.
+27 11 784 1771
Head of Structured Finance
+27 11 784 1771.
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Structurally Enhanced Corporate Bonds Rating Criteria (October 2013)
GCR’s Global Master Criteria for Rating Corporate Entities (August 2013)
Curro Holdings R400m Secured Notes Pre-Funding Report (April 2014)
Curro Holdings Corporate Rating Report (April 2014)
RATING LIMITATIONS AND DISCLAIMERS
ALL GCR’S CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: http://GLOBALRATINGS.NET/UNDERSTANDING-RATINGS. IN ADDITION, GCR’S RATING SCALES AND DEFINITIONS ARE ALSO AVAILABLE FOR DOWNLOAD AT THE FOLLOWING LINK: http://GLOBALRATINGS.NET/RATINGS-INFO/RATING-SCALES-DEFINITIONS. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, PUBLICATION TERMS AND CONDITIONS AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT http://GLOBALRATINGS.NET.
SALIENT FEATURES OF ACCORDED RATINGS
GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the validity of the rating is for a maximum of 12 months, or earlier as indicated by the applicable credit rating document.
The Issuer and the Arranger participated in the rating process via face-to-face meetings, teleconferences and other written correspondence. Furthermore, the quality of info received was considered adequate and has been independently verified where possible.
The credit rating/s has been disclosed to the Issuer and the Arranger with no contestation of the rating; however, the Arranger did contest the use of replacement cost for the value of the security. Resultantly, through discussion and panel vote the Open Market Values were used as the basis for the value of the security.
The information received from the Arranger and other reliable third parties to accord the credit ratings included the latest Issuer’s audited annual financial statements for the year ending December 2013; an overview of the Issuer’s Schools portfolio as per 28 February 2014; a performance forecast for the period beginning December 2012 and ending December 2025; the insurance policies covering the ceded schools; the applicable Valuation Reports (valuations conducted by an Independent Valuer, Appraisal Corporation, in February 2014); and the relevant draft transaction documents together with the relevant legal and tax opinions.
The rating/s above were solicited by the Issuer of the Transaction; GCR has been compensated for the provision of the ratings.